An extremist, not a fanatic

November 08, 2010

Small truths, big errors

Betterpeople than I have pointed to the practical and philosophical problems with the ConDems’ proposal to introduce workfare. What interests me here is that this represents a common trick (or is it just error?) on the right.The thing is, the number of unemployed who don’t want to work might well be small. There are only 266,300 people who have been claiming JSA for over 12 months (table 11(2) of this pdf). Many of these, though, have become long-term unemployed because job opportunities dried up in the recession. In August 2008 - just before Lehmans went bust - only 100,800 were long-term JSA claimants. If we take this as a measure of those who really don’t want to work, then “workshy scroungers” represent a mere 6.8% of the claimant count, 4.1% of the LFS measure of unemployment, and 2.1% of the wider unemployed (which adds the economically inactive who‘d like a job to the LFS measure of unemployment.)The vast majority of unemployment - over 9-10ths on this reckoning - has nothing to do with people not wanting to work, and everything to do with a lack of demand for labour. And this is where that rightist trick (or error) enters. They mistake small truths for large ones, and use the small truth to obfuscate the big one. So, the truth - that a few of the unemployed don’t want to work - is exaggerated and used to hide the bigger truth, that the vast majority of unemployment has other causes.I say this is a common trick because it appears in other guises, for example:1. “Higher taxes deter people from working.” This truth disguises other truths - that taxes also have income effects that might increase labour supply or that it might be socially destructive rent-seeking that’s deterred, not just productive activity. 2. “Nationalized banks would make inefficient and politically motivated loans.” This truth hides the bigger truth - that private banks create the risk of massively costly financial crises.3. “The poor benefit from living in wealthy capitalist societies.” This trivial truth hides a trickier question: does free market capitalism benefit them more than egalitarian alternatives?This is a cunning and powerful rhetorical device. But policy shouldn’t be based upon rhetorical tricks.Another thing. The question: “how many of the unemployed don’t want to work?” is far trickier than generally supposed. This is because preferences adapt to circumstances; if you can’t find a job, one way to preserve your well-being and mental health is to reduce your wants. The claim that “people are unemployed because they don’t want to work“ could, I suspect, often be reversed: people don’t want to work because they are unemployed.

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Existing Flexible New Deal contracts have the workfare already built in, this policy is a couple of years old. But the whole point of workfare is not for the individual claimants, it is an incentive for the contracted providers of welfare to work services who will deliver the 'Work Programme'. The point is that delivering 4 weeks of mandatory activity is very expensive indeed for the provider and so acts as a powerful incentive to get the person into work before this point i.e. two years on benefit (and one year with the provider). Its an attempt to mitigate what's known as 'parking' where providers have a uniform price per claimant and therefore an incentive to work with the easiest to get into work ('cream') and leave the rest ('parking'). This point was made by James Purnell while still the SoS around the time that Flexible New Deal (the precursor to the Work Programme) was being introduced

One of the unwritten rules of bourgeois politics is that basing policy on rhetorical tricks serves the interests of individual politicians and political factions. Evidence-based policymaking, where it exists at all, has to function within this sorry framework, and the more canny evidence-based policymakers know how to manipulate rhetoric-abusing colleagues so as to give evidence-based policy proposals a running chance.

The problem is that low expectations are central to any evidence-based policymaking strategy. Just as they are to long-term benefits claimants who have become virtually unemployable, and are for this reason an embarrassment to the ruling classes.

The 'feckless' few cannot be blamed for defending their interests against those of the state, whether the latter be Tory or Labour-controlled.

This post highlights an important point with regard to ConDems reforms: where's the evidence for any of it? It truly is Daily Mail, anecdotal policymaking.

Sweeping changes to the NHS, regional development, decision-making in local government, benefits are being made, but I've yet to see any evidence that suggests these reforms are going to: a) be cheaper/more efficient; b) deliver better quality services; and c) not cause abhorrent inequalities.

Just to comment further on the point Luis made, surely this isn't a problem of the right, but of ideology in general.

For example, people on the left are often quite concerned about monopoly. However, as reasonable as those concerns are the instances of monopoly are quite rare and even when they do exist they may exist for a good reason e.g. that firm is the most efficient at fulfilling consumer needs.

More broadly, the right often see problems with government and suggest market solutions. Whilst the left sees problems with the market and suggests government solutions. The problem here is that both the market and the state 'fail' against some measure. Failure to realise this is present in so much political debate and disappointingly some scholarship.

Presumably you think that a national bank would be more heavily regulated, thus avoiding financial crises. I disagree:
1) Financial services is already one of the most heavily regulated industries in the UK yet our government failed to prevent the crisis.
2) the crisis was precipitated abroad - in the American housing market - how would a nationalized bank protect us from foreign financial markets?

Unemployed people are in the public sector (so sacking Civil Servants merely reduces the finances/consumption by said people and demand for firms output so they cut output/incomes and so the vicious spirals on...) and get paid welfare for not very much. Why not get them to do something/anything useful at minimum living wages, this will increase demand nationally, increasing sales/income in a virtuous circle?

This is known as a Job Guarantee or the Employer of Last Resort and is often linked with Modern Monetary Theory.

When you think about it, public surpluses take money out of the system, in the end the public sector owns everything aka Communism, ironic or what, the T Party policy results in what they hate the most!

Logically if the private sector wants to net save say 5% and trade nets to zero but averages/means to say 3%, National Income Accounting Identities say that public deficits of 8% will be normal.

Something may indeed be true but what needs flushing out is what might be even more true, as it were. Or the reasons why that is true (I can't jump is true but it's becuase you are standing on my foot).

'the besetting danger is not so much of embracing falsehood for truth, as of mistaking a part of the truth for the whole.'

Your arguments lead me to conclude that the solutions lie in supply-side economics, increasing demand for labour....which the Left automatically and knee-jerkingly derides for the associations with Reagan. I do not see mnay supply0side solutions being put forward. I am not convinced that a state bank will do any more than promote some more Concorde/Meriden projects and all those other all world-leading industries that UK governments of all angles have tried to create. Also, just how many times have the financial insitutions brought the system to crash - crisis was averted in the 70s (was that due to better regulation, wiser regulation, lack of unqualified government interference?) - whereas government policies have lurched from crisis to crisis - generally in the UK since 1945 on the subject of the exchange rate.